Effects of International Remittances on Economic Growth in Tanzania.

Juma, Juma Faki (2020) Effects of International Remittances on Economic Growth in Tanzania. Masters thesis, The Open University of Tanzania.

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Abstract

The key study problem of this research was to determine the relationship between international remittances and economic growth in Tanzania. The study engaged data covering a period of 30 years (1988 – 2017). Data was collected from the World Bank and International Monetary Fund database. The study uses the Ordinary Least Square Estimation (OLS) and cointegration relationship among the variables. The study also utilized both the Augmented Dickey – Fuller (ADF) and the Philip Perron (PP) tests to examine the properties of the variables. It was observed that the variables were stationary, although not in their level form but in their first difference except Labor force. It was also observed that all the variables were co – integrated. The findings indicate that, international remittance has no significant effect on economic growth in Tanzania. Also it was observed that international remittances does not cause economic growth in Tanzania which signifies that; most of the remittance that flow in Tanzania are used for household consumptions rather than investment purposes. As a policy options; Government should design guidelines which would divert remittances receipt into more productive uses, develop a unique Banking Products for Diasporas that will encourage Diasporas to maintain bank accounts in their residing country. The need to engage all remittances recipients for enhanced data gathering and management system is recommended. In addition, there is the need to establish the joint venture approach to financing community development projects. Consequently, some of these strategies will encourage Diasporas to use a proportion of remittances to fund community development projects, with joint – financing that is provided in the form of public subvention by the Government.

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